The decision to sell your business is one of the most important decisions a business owner will make in their lifetime. The process can be daunting and full of challenges. One tool utilized by large corporations is now more commonplace and instrumental to a successful sale for family and closely held businesses. This tool is a Sell-side Quality of Earnings (QoE) report.

In this article, we will explore the importance of Sell-side Quality of Earnings reports when selling your business and how they can impact the sale price and overall success of the transaction.

What is a Sell-side Quality of Earnings Report?

A Sell-side Quality of Earnings report is a comprehensive financial analysis of your business typically prepared by the transaction advisory practice of a CPA firm with the objective of presenting a clear and accurate picture of your business’s financial performance to potential buyers.

Key components of a Sell-side QoE report include:

1. Financial Statement Analysis: This includes a detailed examination of the company’s income statements, balance sheets, and cash flow statements. It identifies any unusual or non-recurring items that may distort the true financial performance.
2. Adjustments: Sellers often adjust the financial statements to reflect the business’s sustainable earnings. These adjustments can include adding back excess owner compensation, family members on the payroll that will not stay with the business post-closing, non-operating expenses, or non-recurring items.
3. Working Capital Analysis: Examining the working capital requirements of the business is critical to the sales process. Every deal requires that the Seller deliver an agreed-upon working capital amount at closing. A Sell-side QoE report provides a detailed analysis to support the working capital calculation delivered at closing thereby avoiding potential adjustments to the sales price.
4. Customer and Vendor Analysis: Understanding the company’s relationships with its major customers and vendors can provide insights into the stability of the revenue stream and cost structure.
5. Normalized Earnings: The report often calculates normalized earnings, which are adjusted earnings that give potential buyers a clearer picture of the business’s true profit potential.

Value propositions of Sell-side Quality of Earnings Reports:

1. Enhanced Credibility: A well-prepared Sell-side QoE report adds credibility to your business and the financial information you provide to potential buyers. It demonstrates transparency and a commitment to providing accurate and reliable data.
2. Value Maximization: One of the primary goals when selling a business is to maximize its value. By identifying and presenting normalized earnings, a Sell-side QoE report can support a higher asking price, potentially resulting in a more lucrative deal.
3. Faster Transaction Process: Buyers often conduct due diligence before making an offer. A comprehensive Sell-side QoE report streamlines this process by providing all relevant financial information upfront, expediting negotiations, and reducing the risk of surprises that could delay or derail the sale.
4. Mitigation of Buyer Concerns: Buyers may have concerns about the stability and sustainability of a business’s earnings. A Sell-side QoE report addresses these concerns by highlighting any one-time expenses, non-recurring events, or other factors that might have affected historical financial performance.
5. Negotiation Advantage: Armed with a detailed QoE report, sellers are in a stronger position during negotiations. They can provide evidence-based arguments for their asking price and the terms of the deal.
6. Reduced Contingencies: Buyers often include contingencies in their offers, such as performance-based earn-outs. A Sell-side QoE report can help reduce the need for such contingencies, making the transaction terms more favorable for the seller.


A Sell-side Quality of Earnings report is an indispensable tool that can significantly impact the outcome of a business sale. It provides transparency, enhances credibility, and justifies a higher valuation, all of which contributes to a smoother and more successful transaction.

Before embarking on the journey of selling your business, consider investing the time and resources to prepare a comprehensive Sell-side QoE report. Doing so can help you not only achieve a better deal but also ensure that your legacy business is handed over to the right buyer that is the right fit to continue the success of the business you have worked so hard to build.

Osage Advisors provides a lot of guidance in the M&A market here on our blog and on our YouTube channel and Podcast.